How to Start a Private Practice as a Doctor: The James Moore Guide to Building a Sustainable Healthcare Business

A lot of physicians dream about owning their private practice, but few understand the business reality that comes with it. Starting a medical practice isn’t just about caring for patients. It’s about running payroll, managing overhead, getting credentialed, paying quarterly taxes and negotiating vendor contracts.

Without that understanding, a practice can easily close down because of poor planning and execution. Even top-notch clinical skills won’t save a practice from bad books, low performance or tax surprises. If you’re thinking about launching your own practice, the best time to build a sustainable plan isn’t after you open your doors. It’s before you even sign the lease or the purchase agreement.

Understanding the Financial Reality of Private Practice

As doctors, you’re trained to understand health issues and solutions. But there are additional skill sets and steps required to launch a profitable medical practice, and ignoring them can lead to expensive consequences. Aligning your personal goals with your business numbers helps you build something durable instead of just opening a clinic.

Let’s start with the basics. According to industry benchmarks from the Medical Group Management Association (MGMA), startup costs for a solo or small-group practice typically range from $70,000 to over $100,000, depending on the specialty, location and technology needs. This includes build-out costs, legal setup, equipment, software, licensing, insurance and a few months of operating expenses (but notably, not your salary).

Where that money comes from matters. Many physicians fund the startup phase through a mix of SBA-backed loans, bank credit lines or specialty lenders. Others try to bootstrap with savings, but that can add stress if collections are delayed or patient volume ramps up slowly.

What often surprises physicians is how much they need before the first reimbursement arrives. Depending on your payer mix and credentialing timeline, it could be 60–120 days before insurance payments start coming in. Without a cash reserve or line of credit, your practice could be underwater before it treats its 50th patient.

That’s why one of the smartest first moves you can make is to work with a CPA before you spend your first dollar. Together, we’ll map out what it takes to reach break-even, not just what it costs to launch. We’ll help you calculate working capital needs, build projections and assess whether your personal income expectations are realistic in the first 6–12 months.

 

 

Building a Strategic Foundation for Long-Term Success

The real work in opening a private practice lies in the planning. One of the most important (and overlooked) decisions you’ll make early on is choosing the right legal and tax structure for your practice. This isn’t just paperwork. The structure you choose affects how much you pay in taxes, your exposure to liability, how you compensate yourself, and even how easily you can bring on partners in the future.

Most medical practices fall into one of three categories: LLC, S corporation or C corporation. Each has its own implications for taxes and ownership. For example, an S corp might offer savings through pass-through taxation, while a C corp may be preferable if you plan to reinvest heavily in the business and grow quickly. But no structure is best across the board; it depends on your revenue goals, risk tolerance, and long-term plan.

And then there’s the business plan. You’re now the CEO of a new business. You need a realistic, data-informed plan that projects startup costs, monthly expenses, expected revenue, break-even point and growth strategies. If you’re applying for financing, lenders will require this anyway. But even if you’re self-funding, it’s essential for understanding where your cash is going and when it’s coming back in.

James Moore’s healthcare advisory services are built to help providers make confident decisions early, before small mistakes become big liabilities. We’ll work with you to run entity comparisons, prepare financial projections, and advise on tax implications from day one so you can build a practice with staying power.

Many of our physician clients say the early planning process was when their practice truly started to take shape. That’s the point: You shouldn’t have to figure this out on your own — and you don’t have to.

Navigating Compliance, Credentialing and Risk Management

If there’s one thing that catches new practice owners off guard, it’s the timeline for payer credentialing. Getting in network with insurance companies takes anywhere from 45 to 120-plus days, depending on the carrier and your specialty. And until that credentialing is complete, you’re not getting paid for those visits.

This makes it critical to begin credentialing as early as possible, often before your office is even furnished. We’ve seen situations in which a physician opens their doors and sees patients for two months, only to realize they’re not properly enrolled and won’t be reimbursed. That’s a tough way to learn how billing systems and insurance networks actually work.

Along with credentialing, you’ll need to get a handle on regulatory compliance. This includes HIPAA privacy and security rules, OSHA requirements, CLIA (if you’re doing lab work) and state-specific licensure and staffing laws. Failing to meet even one of these can lead to fines or forced closure.

It’s about more than patient safety or privacy (though those matter, of course). It’s about risk management. A well-run practice protects itself from the legal, financial and reputational risks that come with a medical business. That means having the right malpractice insurance, the correct corporate policies, and internal processes that actually work is critical.

We recommend setting up basic internal audits in your first year. This might include a HIPAA security risk assessment, revenue cycle walkthrough, a billing and coding review, or cybersecurity testing — all services we help our clients coordinate. You can also check guidance from the Centers for Medicare & Medicaid Services (CMS) on what new providers should prepare during setup.

Private practice means independence, but not in isolation. Having a trusted advisor in your corner helps you anticipate what’s coming and avoid the most common early-stage mistakes.

Managing Cash Flow and Financial Health in the First Year

Your first year in private practice can be the most financially vulnerable. That’s because cash flow and profitability aren’t the same thing. Many new practice owners don’t realize this until they’re struggling to make payroll. You can be profitable on paper but still run out of cash if your collections lag or overhead climbs faster than expected.

The truth is that revenue cycle management will make or break your early operations. If your billing isn’t clean, your claims aren’t timely, or your processes aren’t efficient, you’ll wait months to get paid. And that delay could compromise everything from staff retention to rent payments.

A structured financial system is essential before your first appointment is booked (as opposed to plugging into QuickBooks and hoping for the best). Physicians should have a custom accounting system that aligns with their payor mix, specialty and growth plans. That often includes guidance on EHR integrations, KPI dashboards and monthly reporting that highlights your burn rate, average days in AR and net collections rate.

It’s also important to set aside a three-month cash reserve if possible, particularly in specialties with high startup costs or equipment purchases. This allows you to focus on growing the practice without reacting to every minor cash dip.

Remember, surviving your first year isn’t just about making enough money. It’s about managing what you keep and making informed decisions with the numbers in front of you.

 

 

Tax Strategy for Private Practices: Planning From Day One

Starting a private practice without a tax strategy is like practicing medicine without patient charts. You might be doing good work, but you’re missing the data that drives better decisions.

The IRS allows physicians to deduct many startup costs if they’re documented and properly categorized. For example, organizational expenses, legal fees, initial marketing and certain equipment purchases might qualify under Section 195 or Section 179 deductions. These deductions can offset thousands in early income, but only if they’re part of your planning and not an afterthought.

Also important: choosing the right accounting method. Many new medical practices start on a cash basis (recognizing income when received and expenses when paid), which simplifies taxes and cash flow tracking. However, some specialties or growth models benefit more from the accrual method, especially as AR and inventory grow. The choice you make can significantly affect how you report income and how much you owe.

You’ll also need to understand the quarterly tax payment system. Unlike W-2 employees, you’re now responsible for estimating and paying your personal income taxes four times a year (April, June, September and January) if you’re self-employed or the owner of a pass-through entity. Missing those deadlines can lead to penalties and interest, which add up quickly when your revenue is inconsistent.

Need a refresher on these rules? The IRS offers a complete breakdown of deductible startup expenses and accounting method options. But interpreting that guidance and applying it strategically to a medical business is tricky.

When used properly, sound tax strategies can help you build a stronger, more profitable practice from day one. At James Moore, we help new practices claim the qualified business income (QBI) deduction if eligible, optimize depreciation schedules and avoid costly tax mistakes like misclassifying staff or missing state-specific filing obligations.

Private Practice, Public Presence: Marketing, Hiring & Growth

Once the doors are open and patients start arriving, a new chapter begins. Growth doesn’t happen by accident. It happens when you’re intentional about how you market, how you hire and how you build infrastructure that can scale.

Let’s talk hiring.

Bringing on your first employee triggers a wave of new obligations. You’ll need to understand the difference between W-2 employees and 1099 contractors, and how that affects everything from taxes to benefits. Misclassifying workers is one of the most common mistakes new practice owners make, and it can lead to fines and back taxes.

Equally important is deciding how you’ll handle payroll, benefits and HR compliance. Many new practices choose to outsource this early, and with good reason. It’s a fast way to avoid compliance pitfalls, reduce admin time and stay focused on patients.

Then there’s marketing.

Marketing isn’t just about putting your name online. It’s about building a public presence that reflects your clinical strengths and practice culture. At a minimum, this includes:

• A modern website with online scheduling
• Verified profiles on Google Business, Healthgrades and relevant directories
• Patient intake and EHR systems that integrate with your practice workflow

These tools improve the patient experience, reduce no-shows and help your front office run smoothly. And if you’re in a competitive market, they may be the reason a patient chooses you over the clinic next door.

Finally, think about scalability.

Too many practices wait until they’re overwhelmed to think about expanding hours, adding providers or opening another location. If growth is part of your long-term goal, start by documenting processes now so your team isn’t reinventing the wheel every time something changes.

At James Moore, we help healthcare entrepreneurs think beyond today’s schedule and plan for what’s next. From staffing and benefits strategy to infrastructure support and advisory services, our goal is to build alongside you (not just catch up after the fact).

Start a Successful Private Practice: Final Thoughts From James Moore

Starting a private practice is one of the most demanding yet rewarding moves a physician can make. It’s more than a clinical decision; it’s a financial, operational and strategic one. From choosing your entity structure and managing early cash flow to handling compliance, tax planning and hiring, every detail plays a part in your long-term success.

James Moore has helped healthcare providers at every stage of their business. And we’re ready to do the same for you.

Want to build a medical business with staying power? Contact a James Moore professional today to get started.

 

 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.